U.S. Leading Index Increases Again, Comments from Dr. Joe Webb
Press release from the issuing company
February 19, 2004 -- The Conference Board announced today that the U.S. leading index increased 0.5 percent, the coincident index increased 0.3 percent and the lagging index did not change in January.
The leading index continued increasing in January. The 0.5 percent gain was the largest increase since October. The leading index has now increased at a 5.0 percent annual rate from its most recent low in March, and this growth has continued to be widespread. The one exception has been the real money supply, which continued declining in January.
The coincident index also increased in January, and has now grown at a 2.0 percent annual rate from its most recent low in April. Every component (production, sales, income, and employment) has contributed to the growth of the coincident index.
Real GDP increased at a 6.1 percent annual rate during the second half of 2003, consistent with the pickup in the leading index that began in the second quarter. The continued growth in the leading index (about a 5.5 percent annual rate excluding the recent weakness in the money supply) is signaling that strong economic growth should persist in the near term.
Leading Indicators. Five of the ten indicators that make up the leading index increased in January. The positive contributors - beginning with the largest positive contributor – were index of consumer expectations, stock prices, average weekly manufacturing hours, vendor performance and average weekly initial claims for unemployment insurance (inverted). The negative contributors - beginning with the largest negative contributor – were building permits, interest rate spread , real money supply* and manufacturers’ new orders for nondefense capital goods*. The manufacturers’ new orders for consumer goods and materials* remained unchanged.
The leading index now stands at 115.0 (1996=100). This index increased 0.2 percent in December and increased 0.3 percent in November. During the six-month span through January, the leading index increased 2.0 percent, with eight out of ten components advancing (diffusion index, six-month span equals 80 percent).
Coincident Indicators.All four indicators that make up the coincident index increased in January. The positive contributors to the index - beginning with the largest positive contributor - were industrial production, personal income less transfer payments*, employees on nonagricultural payrolls, and manufacturing and trade sales*.
The coincident index now stands at 115.8 (1996=100). This index held steady in December and increased 0.3 percent in November. During the six-month period through January, the coincident index increased 1.0 percent.
Lagging Indicators. The lagging index stands at 98.2 (1996=100) in January, with four of the seven components advancing. The positive contributors to the index – beginning with the largest positive contributor – were change in labor cost per unit of output*, ratio of consumer installment credit to personal income*, change in CPI for services* and ratio of manufacturing and trade inventories to sales*. The negative contributors - beginning with the largest negative contributor – were average duration of unemployment (inverted) and commercial and industrial loans outstanding*. The average prime rate charged by banks held steady in January. Based on revised data, the lagging index decreased 0.4 percent in December and decreased 0.5 percent in November.
Quick Take from a Vacationing Dr. Joe:
The Conference Board's leading economic indicators are yet another sign of sustained economic improvement. The index implies a +5.5% GDP for early 2004. While jobs issues keep dogging the economy, new unemployment claims were down 24,000 (a decrease that was three times larger than the "experts" expected), and the 4-week moving average decreased again. Next week, when my column returns, I'll discuss these and other items, including the pickup in new business formations.
On the Web: Conference Board
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